Analysts at Nomura Code Securities have issued a research report which downgrades the major European pharmaceuticals sector, saying that generic competition to blockbusters and weakened pipelines are taking their toll.

Authors of the report, Mike Ward and Paul Diggle said the broker is moving from a ‘neutral’ to an ‘underweight’ rating, believing that the European pharmaceutical majors will underperform the wider market. Specifically, the analysts have issued a ‘reduce’ rating on Sanofi-Aventis, while AstraZeneca, Novartis and Roche were rated as neutral. They only recommended Shire and GlaxoSmithKline as “buys.’

The analysts added that the use of copycat versions of drugs by US healthcare providers are “worrying" and that generics are seriously damaging sales, especially at AstraZeneca and Novartis. They also expressed their concern that the US Food and Drug Administration has adopted an "increasingly difficult" stance towards new applications, which is a result of "intensifying political pressure".

Last year the agency only approved 18 new chemical or biological entities in 2007, the lowest level since 1983, and issued 35 approvable letters. This has created a "drugs backlog" that is likely to get worse, said Mr Ward and Mr Diggle.